Recent news out of New Jersey announces that the state's appellate court overturned a lower court's entry of a foreclosure judgment in favor of Deutsche Bank. Apparently, Deustche Bank attempted to foreclose on a borrower without being able to prove that it had possession of the original promissory note at the time that it brought its foreclosure action. As a result of the bank's oversight, the appellate court ruled that the bank will have to restart the entire foreclosure process from scratch:
The case could impact the prospects of many state foreclosure cases, according to Peggy Jurow, a senior attorney for Legal Service of New Jersey who deals with foreclosure and predatory lending cases.
"What today’s case does is say that the lender has to have had the assignment of mortgage and possession of the (loan) note before it files a foreclosure action," Jurow said yesterday. "They can’t fix up that sort of paperwork problem afterwards. They have to dismiss the case and start again."
A news article summarizing the case is here. The appellate court's opinion is here. Although this ruling was certainly a win for the borrower, I think that any victory will be short-lived. The issue here appears to be nothing more than a paperwork foul-up. Despite claims of fraud by the borrower against a shady-sounding mortgage rescue outfit, there does not appear to be any dispute that the loan is in default. And now, there does not appear to be any doubt that Deutsche Bank has actual possession of the original promissory note. Given these facts, nothing suggests that Deutsche Bank can't foreclose on the borrower at its leisure.
Thus, from the outside looking in, it is difficult to see this as a watershed moment for foreclosure defendants. Maybe the procedural posture of the case before the trial court makes this ruling especially significant. Maybe New Jersey foreclosure practice is plagued with mortgage holders bringing suits without having possession of the underlying note. And maybe this decision will impact similarly-postured cases involving allegations against fraudulent mortgage-rescue schemes. But for run-of-the-mill foreclosure actions, I think that the actual impact of this case will be minimal to marginal. Mortgage holders will tighten up their procedures, a number of cases might have to be dismissed and refiled, and life will go on. Even though this decision is good for this particular borrower, it is hard to see how it is a game-changer.